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sase mini-conference cfp “Regulation, Innovation, and Valuation in Markets for Health and Medicines” – deadline extended to Fri., Jan. 24, 2020

SASE annual meeting submissions are currently open, and the submission deadline has been extended to Fri. Jan. 24, 2020!  (The 2020 annual meeting will be held July 18-20 at the University of Amsterdam in the Netherlands.)

For those studying organizations, innovation, health, medicines, markets, and/or inequality, I wanted to call attention to one of the mini-conference calls, organized by Kathryn Ibata-Arens and Etienne Nouguez.

Society for the Advancement of Socio-Economics (SASE) 2020, 18-20 July

University of Amsterdam

“Regulation, Innovation, and Valuation in Markets for Health and Medicines”

Mini-Conference Call for Papers

Conference Co-Organizers:

Kathryn Ibata-Arens, PhD

Vincent de Paul Professor of Political Economy

DePaul University

Etienne Nouguez, PhD

CNRS Researcher

Center For the Sociology of Organizations (SciencesPo/CNRS)

The world is experiencing rapid transformations in the development of new approaches to improving human health and the health of communities, healthcare provision, governance over the use and pricing of drugs and medicines, and medical innovations in biotechnology (genomics and stem cell-based therapies). For example, open innovation systems and sharing in the commons have introduced healing medicines and medical innovations (e.g. the Human Genome Project). At the same time, there is growing inequality in who gets access to medical care and medicines, and at what price.

 

Meanwhile, market competition has in part led to the opioid crisis of addiction in the United States, human subjects abuses in developing countries in the race to develop new drugs, and a decline in the discovery of radical new innovations in medicines for poor populations. This mini-conference aims to convene a group of related panels around issues in global health and medicines, to facilitate useful critical discussion and reflection on participants’ works-in-progress. Driving questions include:

 

-What theoretical advances are being made in understanding causal mechanisms in improving, or undermining human health and community health, for example, through state policy and firm and organizational strategy? What new frameworks and methods are being developed to identify key actors and explain actions (e.g. improving, or undermining health, broadly defined)?

 

-What is the evolving role of the state, healthcare systems and professions, and other actors (multilateral bodies, firms, non-profit organizations) in medical and medicine provision and innovation? Are we seeing a shift from traditional dominant blocks (North America and Europe) to new actors (Asia and the Global South)? Likewise, how have states and healthcare organizations been effective (or ineffective, indifferent) in the valuation and pricing of medicines (fair, equitable, and affordable access to life saving medicines)?

 

-What should be the responsibility, if any, of the global intellectual property rights regime as arbitrated by such powerful organizations as the World Trade Organization and global corporations in monitoring access and benefit sharing of profits resulting from research and development into new drugs and medicines?

 

-What are the roles for regulation and institutionalization of markets for such boundary-products between medicine and health food as probiotics, herbals, so-called nutraceuticals, and other dietary supplements – in ensuring the health and safety of consumers and patients?

 

-In what way is current research and policy aiming for “inclusive” innovation (e.g. in healthcare provision, new drug discovery) focused on distributive aspects versus stakeholder inclusion, or both (e.g. under the United Nations Sustainable Development Goals (SDGs))? What is the relative role for (social) entrepreneurs, large firms, and other actors?

 

Our mini-conference encourages submissions of papers exploring emerging frameworks and theories, as well as empirically rich original data from the developed and developing world and at various levels of analysis (e.g. local community, firm, state, multilateral institution). Scholars at all levels are welcome. In the spirit of innovation and creativity, the panels will have an interactive workshop format around discussant feedback and moderated audience participation. For more information, contact the co-organizers at medhealthSASE2020@gmail.com.

You can also download the full mini-conferenc call here: SASE2020HealthandMedicinemini-conferenceCFPK10-28-19

Grad students, post-docs, and other early career scholars, please also note: travel funding and a pre-conference workshop day are available, by a competitive selection process, for those who submit full papers for consideration and are accepted in a network or mini-conference.

Written by katherinechen

January 2, 2020 at 7:20 pm

state-of-the-field article “School choice’s idealized premises and unfulfilled promises” now available

Just before 2019 ends and we enter 2020, I’ve finally broken the superstition that whatever you do on New Years will be what you will do for the following New Years.  This year, a R&R converted into an accept and page proofs before New Years hit!

My co-authored paper with Megan Moskop is now available under the Organizations & Work section of Sociology Compass!  In this paper, using critical sociology and education research, we overview the variants of school choice systems in the US and their impacts on students, schools, and society.

Here’s the abstract:

School choice’s idealized premises and unfulfilled promises: How school markets simulate options, encourage decoupling and deception, and deepen disadvantages

Abstract

In school choice systems, families choose among publicly funded schools, and schools compete for students and resources. Using neoinstitutionalist and relational inequality theories, our article reinterprets recent critical sociological and education research to show how such markets involve actors’ enacting myths; these beliefs and their associated practices normalized white, privileged consumption as a basis for revamping public education as market exchanges between schools and families. Proponents argue that choice empowers individuals, focuses organizations on improving quality, and benefits society more broadly by reducing inequality and segregation. We argue that such school choice myths’ excessive emphases on individual decision‐making and provider performance obscure the actual impacts of school choice systems upon people, organizations, and society. First, rather than enlarging alternatives that families can easily research, select, and (if needed) exit, school choice systems often simulate options, especially for disadvantaged populations. Second, rather than focusing schools’ efforts on performance, innovation, and accountability, they can encourage organizational decoupling, homogeneity, and deception. Third, rather than reducing societal harms, they can deepen inequalities and alienation. Future research should examine both how markets are animated by bounded relationality—routines that enable them to form, maintain, and complete exchanges with organizations—and how activism can challenge marketization.

Please consider assigning this state-of-the-field article in your sociology of education, inequality, economic sociology, and/or organizations courses!  (If your institution doesn’t have access to Sociology Compass, please contact me directly for a copy.)

This paper began when Megan approached me during a March 2018  Future Initiatives “Publics, Politics, and Pedagogy: Remaking Higher Education for Turbulent Times” event at the Graduate Center.  After hearing me talk on a faculty panel about my research interests, Megan asked whether we could do an informal reading group on school choice readings.  We exchanged emails and agreed to meet in person to discuss readings.

At the time, Megan was working on her masters classes and thesis in urban education at the CUNY MALS program.  She was looking for a way to manage her growing collection of citations as she analyzed her past experiences with teaching 8th graders and their families about how to participate in the mandatory school choice market in NYC .

As a new entrant to research on learning and schools through my on-going ethnography of a democratic school, I had the sense that whatever was happening in the insurance market for older adults seemed to exist in other emerging markets for other age groups.  To understand the education options in NYC, I had attended a few NYC Dept. of Education and other orientations for families on how to select pre-K and higher program.  I found these experiences comparable to my observations of orientations for professionals and older adults about enrolling in Medicare: palpable waves of anxiety and disorientation were evident in the reactions and questions from these two differently aged audiences to workshops about how they were supposed to act as consumers felt similar.  I thus became interested in learning about research on the comparable school choice market for my ethnographic research on how intermediary organizations try to orient consumers to the health insurance market.  (Indeed, a side benefit of this collaboration was that the school choice readings helped amplify my development of the bounded relationality concept that ultimately appeared in Socio-Economic Review.)

Megan and I met regularly discuss readings that Megan had suggested and I had found through literature searches in sociology.  After several of these meetings, I raised the possibility of writing a state-of-the-field overview article.  Working on this draft helped us keep track of what we had learned.  It also helped us understand how to map existing research and to identify a void that our respective expertises and writing could address: synthesizing critical studies emerging from organizations and education.   For Megan, I hoped that this experience would give her a behind-the-scenes look at the academic production of research, so that she could decide whether to head this direction.

As we read more about school choice, I realized that we hadn’t come across a chart mapping the types of school choice systems currently in operation.  Megan thus worked hard at developing a table that describes and compares different types of school choice systems.  (In my opinion, this paper’s table is a handy first step for those trying to understand the school choice landscape.)

Meanwhile, I focused on applying an organizational framework to categorize research from the sociology of education and education fields.  As we worked on the drafts in response to writing group and reviewers’ and Sociology Compass section editor Eric Dahlin’s comments, we also realized that no one had systemically broken down the impacts of using market practices to distribute public goods across levels of individual persons, organizations, and society at large.

Along the way, thanks to Megan’s connections to education and activism, we got to learn directly from people about on-going activism and research.  For instance, youth organization IntegrateNYC sent representative Iman Abdul to talk to my “Future of NYC” honors college students about efforts to racially integrate NYC public schools.  Megan and I also attended Kate Phillippo’s talk about her research on school choice in Chicago from her latest book, A Contest Without Winners: How Students Experience Competitive School Choice (2019, University of Minnesota Press).

In all, writing this paper has been a great journey with a fun and insightful collaborator.  Had you asked me back in spring 2018 what the outcome of presenting at a CUNY event would have been, I could not have predicted this.  I am forever grateful that Megan came to talk with me!

Happy New Years, readers!  May the new year bring you joy, happiness, and health.

 

“Talk with your family about [Medicare] Part D over Thanksgiving dinner”: How markets require bounded relationality

 

ObamapardonsWhiteHouseTurkey2014

Question: What do the following three scenarios have in common?

Scenario A.  Congrats, you’re turning 65 years old!

You’re turning 65 years old.  In the US, if you have worked enough units, you are eligible for Medicare; you must select health insurance by choosing among traditional Medicare and HMO plans.  You also need to choose insurance that will cover  your current or anticipated prescription medications.  Depending on where you live, this could involve comparing around 50 different plans.

You start by consulting the Medicare booklet and wading through the flood of mail from insurance providers.  Despite this information, you’re having difficulties understanding the differences among plans and determining how much plans will charge for your medications.  Moreover, you’re not quite sure which medications that you’ll need in the upcoming year.  Each year after this, you’ll have an almost two-month-long window for making these decisions – a period that is happening now, ending Dec. 7.

If you have a long life, you’ll have plenty of practice working with this market.  How do you select a plan appropriate to your needs right now and then in the future?

Scenario B.  Congrats, you’re getting ready to enter high school!

You are a student at a NYC public middle school.  Since students are not automatically assigned to public high schools, you and your family must choose from among 750 programs and rank order your choices.  (If you are two years old or older, your parents must do the same for public pre-K and kindergarten school programs.)  To learn about your options, you can look at a directory of descriptions of these programs and then research each school online.  If possible, you and your family will also attend information fairs and schools’ open houses and tours, where you might be asked to fill out additional forms or leave your information.

Some schools have different criteria for what kinds of prospective students they prioritize, and most selective programs don’t provide rubrics for how they rank prospective students – information crucial for ascertaining your chances of acceptance.  After you submit up to 12 rank-ordered choices, an algorithm, modelled after a medical residency matching program designed by a economist, will generate a match based on schools’ priorities and your listed options.  And, btw, charter schools and private schools have their own admissions processes and admissions deadlines.

How do you choose and rank public high school programs?  Should you try to maximize your choices by also applying to charter schools and, if you have the financial resources, private schools?

Scenario C.  Congrats, you’re rich!

You have amassed enviable, immense wealth.   But, your mattress is bursting, and you distrust regular banking.  And, for whatever reason, you’re not fond of having the state taking a portion to support the common good, social insurance, military spending, etc.  Thinking ahead, you worry about your family having unfettered access to your financial legacy; relatives might fritter away that wealth!  Also, you have a few relationships that other family members don’t (yet) know about, and you want to make sure that those loved ones are also taken care of after your inevitable passing.  So, what to do?

Answer: Most likely, you’ll need what I call “bounded relationality” to assist you with entering complex markets and making exchanges.   To explain what bounded relationality is, I’ll preview excepts from my advance, online first article “Bounded relationality: how intermediary organizations encourage consumer exchanges with routinized relational work in a social insurance market.”

The bounded relationality concept combines two of my favorite theories: (1) economic sociology’s relational work by Viviana Zelizer, Fred Wherry, and Nina Bandjel* and (2) Herbert Simon’s theory about how organizations compensate for people’s bounded rationality, or difficulties with making decisions.

During several years of my research on organizations that support older adults, I observed workshops and meetings for organizational representatives and professionals, including social workers, on topics such as how to select Medicare insurance plans.

At one of these workshops, a representative from the Centers for Medicare & Medicaid Services, described officials’ hopes that families would discuss prescription plans at family get-togethers: ‘We tried to say, “Talk with your family about [Medicare] Part D over Thanksgiving dinner,” but we don’t know if people did.’   His comment revealed how much the market relies upon relational work, or connections formed and sustained with other persons (Zelizer 2012) and organizations.

Using observations of US governmental, advocacy, and human service organizations’ (GAHSOs) talks, I show how these intermediary organizations endorsed “bounded relationality” when teaching conventions for participating in the market of social insurance.  Unlike conventional consumer goods and services markets, insurance options are difficult to evaluate and exchanges are challenging to switch.  Decisions are also consequential, with suboptimal decisions impacting personal well-being and requiring support or intervention by family members, if they are available.

Read more about bounded relationality after the jump: Read the rest of this entry »

book spotlight: beyond technonationalism by kathryn ibata-arens

At SASE 2019 in the New School, NYC, I served as a critic on an author-meets-critic session for Vincent de Paul Professor of Political Science Kathryn Ibata-Arens‘s latest book, Beyond Technonationalism: Biomedical Innovation and Entrepreneurship in Asia.  

Beyondtechnonationalismcover

Here, I’ll share my critic’s comments in the hopes that you will consider reading or assigning this book and perhaps bringing the author, an organizations researcher and Asia studies specialist at DePaul, in for an invigorating talk!

“Ibata-Arens’s book demonstrates impressive mastery in its coverage of how 4 countries address a pressing policy question that concerns all nation-states, especially those with shifting markets and labor pools.  With its 4 cases (Japan, China, India, and Singapore),  Beyond Technonationalism: Biomedical Innovation and Entrepreneurship in Asia covers impressive scope in explicating the organizational dimensions and national governmental policies that promote – or inhibit – innovations and entrepreneurship in markets.

The book deftly compares cases with rich contextual details about nation-states’ polices and examples of ventures that have thrived under these policies.  Throughout, the book offers cautionary stories details how innovation policies may be undercut by concurrent forces.  Corruption, in particular, can suppress innovation. Espionage also makes an appearance, with China copying’s Japan’s JR rail-line specs, but according to an anonymous Japanese official source, is considered in ill taste to openly mention in polite company. Openness to immigration and migration policies also impact national capacity to build tacit knowledge needed for entrepreneurial ventures.  Finally, as many of us in the academy are intimately familiar, demonstrating bureaucratic accountability can consume time and resources otherwise spent on productive research activities.

As always, with projects of this breadth, choices must made in what to amplify and highlight in the analysis.  Perhaps because I am a sociologist, what could be developed more – perhaps for another related project – are highlighting the consequences of what happens when nation-states and organizations permit or feed relational inequality mechanisms at the interpersonal, intra-organizational, interorganizational, and transnational levels.  When we allow companies and other organizations to, for example, amplify gender inequalities through practices that favor advantaged groups over other groups, what’s diminished, even for the advantaged groups?

Such points appear throughout the book, as sort of bon mots of surprise, described inequality most explicitly with India’s efforts to rectify its stratifying caste system with quotas and Singapore’s efforts to promote meritocracy based on talent.  The book also alludes to inequality more subtly with references to Japan’s insularity, particularly regarding immigration and migration. To a less obvious degree, inequality mechanisms are apparent in China’s reliance upon guanxi networks, which favors those who are well-connected. Here, we can see the impact of not channeling talent, whether talent is lost to outright exploitation of labor or social closure efforts that advantage some at the expense of others.

But ultimately individuals, organizations, and nations may not particularly care about how they waste individual and collective human potential.  At best, they may signal muted attention to these issues via symbolic statements; at worst, in the pursuit of multiple, competing interests such as consolidating power and resources for a few, they may enshrine and even celebrate practices that deny basic dignities to whole swathes of our communities.

Another area that warrants more highlighting are various nations’ interdependence, transnationally, with various organizations.  These include higher education organizations in the US and Europe that train students and encourage research/entrepreneurial start-ups/partnerships.  Also, nations are also dependent upon receiving countries’ policies on immigration.  This is especially apparent now with the election of publicly elected officials who promote divisions based on national origin and other categorical distinctions, dampening the types and numbers of migrants who can train in the US and elsewhere.

Finally, I wonder what else could be discerned by looking into the state, at a more granular level, as a field of departments and policies that are mostly decoupled and at odds. Particularly in China, we can see regional vs. centralized government struggles.”

During the author-meets-critics session, Ibata-Arens described how nation-states are increasingly concerned about the implications of elected officials upon immigration policy and by extension, transnational relationships necessary to innovation that could be severed if immigration policies become more restrictive.

Several other experts have weighed in on the book’s merits:

Kathryn Ibata-Arens, who has excelled in her work on the development of technology in Japan, has here extended her research to consider the development of techno-nationalism in other Asian countries as well: China, Singapore, Japan, and India. She finds that these countries now pursue techno-nationalism by linking up with international developments to keep up with the latest technology in the United States and elsewhere. The book is a creative and original analysis of the changing nature of techno-nationalism.”
—Ezra F. Vogel, Harvard University
“Ibata-Arens examines how tacit knowledge enables technology development and how business, academic, and kinship networks foster knowledge creation and transfer. The empirically rich cases treat “networked technonationalist” biotech strategies with Japanese, Chinese, Indian, and Singaporean characteristics. Essential reading for industry analysts of global bio-pharma and political economists seeking an alternative to tropes of economic liberalism and statist mercantilism.”
—Kenneth A. Oye, Professor of Political Science and Data, Systems, and Society, Massachusetts Institute of Technology
“In Beyond Technonationalism, Ibata-Arens encourages us to look beyond the Asian developmental state model, noting how the model is increasingly unsuited for first-order innovation in the biomedical sector. She situates state policies and strategies in the technonationalist framework and argues that while all economies are technonationalist to some degree, in China, India, Singapore and Japan, the processes by which the innovation-driven state has emerged differ in important ways. Beyond Technonationalism is comparative analysis at its best. That it examines some of the world’s most important economies makes it a timely and important read.”
—Joseph Wong, Ralph and Roz Halbert Professor of Innovation Munk School of Global Affairs, University of Toronto
Kathryn Ibata-Arens masterfully weaves a comparative story of how ambitious states in Asia are promoting their bio-tech industry by cleverly linking domestic efforts with global forces. Empirically rich and analytically insightful, she reveals by creatively eschewing liberalism and selectively using nationalism, states are both promoting entrepreneurship and innovation in their bio-medical industry and meeting social, health, and economic challenges as well.”
—Anthony P. D’Costa, Eminent Scholar in Global Studies and Professor of Economics, University of Alabama, Huntsville
For book excerpts, download a PDF here.  Follow the author’s twitter feed here.

markets, opportunity, and justice

At the Winter commencement at Indiana University, one of our speakers, tech business leader Fred Luddy, made a very interesting comment. Basically, he said that life in a market isn’t fair, but there are always more opportunities. I am not sure if he appreciated the depth of the remark, but if you reflect upon it, you realize that it merits a lot of reflection.

Let’s start with the typical approaches to thinking about whether markets are just forms of interaction.  The classic Nozickian position is that markets are just because they are voluntary. If you voluntarily by or sell your property or labor, then the resulting state is just. The critics raise multiple objections. For example, many people think that extreme inequality is either inherently unfair (i.e., only mild deviations from equality are acceptable) or that inequality has negative consequences (e.g., perhaps the very wealthy can unfairly influence government).

I think the most profound response to the critics comes from Hayek, who argued that the “social justice” critique of markets misses an important point. Namely,  Hayek argued that to critique the market based social order you must assume that you know what the right order is and how to make it happen, and that’s a tall order. Still, Hayek’s counter-point to the social justice leaves a lot of people, including myself, a little cold.

Why? Maybe it is unwise to believe that some mystical central planner can know the “right way” to organize society, but it does seem to be the case that the market economy tolerates a lot of things that appear prima facie unjust. A lot of people can lose their jobs through no fault of their own, such as in a recession. Or there can be persistent discrimination against certain classes of people, such as women or ethnic minorities.

In my view, this observation – that markets tolerate substantial levels of injustice – is reasonable. This brings me back to Luddy’s point. What I think he was trying to communicate, in the context of a graduation speech, is that the valuable thing about markets isn’t that they create justice. Rather, they create opportunities you can pursue after you have experienced injustice. In his speech, for example, he described how a business partner had used a stolen identity to embezzle millions of dollars – which he had to pay back to investors. There was nothing just about the situation, but the interesting thing is that he still had more opportunities and could thus move on with this life.

The big idea is that a narrow Nozickian justice and other broader forms of justice are different and that markets are actually fairly good at the former but not the latter. If all we ask if that a chain of interactions be voluntary, then markets fit the bill. If we ask that all possible consequences be desirable, or that all bad actors are relentlessly suppressed and reformed, markets are definitely imperfect. But that doesn’t mean that markets should be rejected. Rather, Luddy’s comment indicates that they have a desirable trait that may promote justice along some margins. Economic opportunities, ranging from the modest taco truck to the next billion dollar start-up, are constantly being created. For many people who experience negative outcomes, they may be a way to move forward and that’s a good thing.

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($4.44 – cheap!!!!)/Theory for the Working Sociologist (discount code: ROJAS – 30% off!!)/From Black Power/Party in the Street / Read Contexts Magazine– It’s Awesome!

Written by fabiorojas

December 28, 2017 at 6:45 am

what problems do people think antitrust is going to solve?

Last week, I asked why antitrust is having a moment (it’s continued, on Planet Money and elsewhere), and why Democrats are using radical language to make fairly modest proposals. In this post, I’m going to ask what problems people think antitrust is going to solve, anyway.

Certainly a lot of the current concern about antitrust comes from a broad sense that corporations are too economically and politically powerful, that our economy has been restructured in ways that make ordinary people worse off, and that massive tech companies are able to use our data in ways that we have little control over. That’s political antitrust. And those are totally real issues.

But I want to explore some new questions being raised that are not exactly within the current scope of economic antitrust, but that are still kind of speaking its language—that are pushing to change the antitrust technocracy, not up-end it. To recap, as it has been construed for the last thirty-plus years, the purpose of antitrust is to promote consumer welfare, generally by trying to keep firms from being able to raise and keep prices above a competitive level. The focus is consumers, and prices.

Increasingly, though, people at least adjacent to the space of antitrust expertise are making claims about economic problems they think are being caused by lax antitrust enforcement, or that antitrust should be addressing. And those proposals are worth keeping an eye on, because as hard as it might be to change the expert consensus, it’s still more likely than a new anti-monopoly movement. (Though the two could certainly reinforce each other.) I see these new arguments as falling into basically three categories.

Market power has effects we didn’t realize

Market power is the ability to keep prices above a competitive level (i.e. above marginal cost). Once upon a time, people thought there was a fairly close relationship between how concentrated a market is—that is, how many companies control what share of the market—and how much market power firms have. Since the 1970s, there has been much less of a presumption that concentration, on its own, indicates market power. That means that there’s been less concern about whether we’ve got four airlines controlling 70% of the U.S. market, or that four carriers control 99% of the U.S. wireless market.

Increasingly, though, people are raising flags about other problems that might result from market power. One of these is labor monopsony—the idea that firms have market power, but as purchasers of labor, not sellers of products, and that this is driving wages down. The Council of Economic Advisers put out a report last fall suggesting this might be happening, and Democrats’ mention of “bargaining power for workers” implies this is part of what they’re trying to address. There are related arguments about market power in supply chains and the emergence of “winner take most” industries that also suggest links between concentration or market power and wages.

In theory, monopsony can be handled within the current legal framework, though it is rarely addressed in practice. So developing arguments about the effects of market power on workers, and a legal framework for addressing that within antitrust, is one conceivable new direction for antitrust.

Others are arguing that market power can lead firms to attach undesirable conditions to products that make them lower quality, even as price remains the same. In particular, some scholars, including Nobel Laureate Joe Stiglitz, have framed privacy as an antitrust issue: the product may be free, but consumers have no choice about how their data is used (and in the case of platforms like Facebook, no equivalent competitors). Privacy is hard to address within a framework focused purely on price. But in Europe, competition policy is increasingly tackling privacy issues, and Germany is currently investigating whether Facebook’s dominant position is forcing consumers to give up their privacy without having an alternative choice.

Market power has causes we didn’t realize

The Atlantic just featured a story with the dramatic title, “Are Index Funds Evil?” The article discusses the rise of large institutional investors—index funds, though not only index funds—and what it means that, increasingly, big chunks of competitors in a specific market are actually owned by the same few corporations. It goes on to discuss work by José Azar, Martin Schmalz, and Isabel Tecu that finds that this common ownership enhances market power, and that airline ticket prices are 3-7% higher than they would be under separate ownership.

In this story, index funds were the hook, but it just as easily could have been framed around antitrust. In a way, common ownership was the original antitrust question: the big trusts of the late 19th century were not single-firm monopolies, but competitors that had turned over ownership to a group of trustees that made unified governance decisions. And while research in this area is still new and findings tentative, legal scholars are already making the case that antitrust law can cover the anticompetitive effects of these horizontal shareholdings. If this work continues to hold up, this seems potentially transformative.

Technological change is creating new threats to competition

Finally, a fair bit of the recent chatter is basically arguing, “it’s the technology, stupid.” The dynamics of competition change as more of the economy shifts to online platforms. Because of network effects, companies like Facebook, Google, Apple, and Amazon are hard to compete with—much of their value comes from their existing user base. And because they aren’t just selling products to consumers, but connecting consumers with producers, they aren’t acquiring market power in the traditional sense. Facebook and Google are free products, after all.

But the power of network effects means that they have a tendency towards monopoly. And the fact that the four largest companies by market capitalization are platforms suggests how central platforms have become to our economy.

So we have these new companies that have become very large, and that appear monopolistic, though they also create great value for consumers. From an antitrust perspective, they don’t really appear to be a problem, because they aren’t raising prices. And the history of rapid technological change over the past 25 years, including the rise and fall of a number of once-dominant platforms, raises the question of whether even platforms behaving in anticompetitive ways pose much of a long-term threat.

Recent scholarship, though, argues that monopolistic platforms are in fact anticompetitive, that it is a problem, and that current law is poorly equipped to handle. Lina Khan’s much-circulated note in the Yale Law Journal, for example, argues that 1) platforms encourage predatory pricing—generally seen as irrational (and thus not an issue) within antitrust law—because network effects encourage pursuit of growth over profit, and 2) platforms collect data on rivals that give them an unfair competitive advantage. These sorts of issues clearly fit within the broad scope of “protecting competition,” but don’t fit easily with a consumer welfare, market power conception of antitrust.

Changing that would be a significant project, but if we have an economy that is dominated by firms whose potentially anticompetitive activity is essentially beyond the scope of antitrust, there’s not much left to antitrust. And again, the massive fine the E.U. just levied on Google—for favoring its own shopping service, consisting of companies that pay Google to be on it, over competitors in search results—suggests what this could look like. So far, the U.S. has not demonstrated much enthusiasm about expanding antitrust in this direction. But it’s not inconceivable that it could happen, and it could be done within a framework that was focused solely on competition, if not only on consumer welfare.

Again, all these challenges to the current antitrust framework are at least in the ballpark of its conversation, even if they would require pushing the law in new directions or advancing the acceptance of new economic theories. And they are not the only arguments that are in play here. For example, the question of whether inequality is facilitated by concentration or market power, or whether it has become such a central economic problem that antitrust should try to address it, have prompted enough discussion that two leading antitrust scholars have felt the need to argue that antitrust should leave inequality alone.

Unlike political antitrust, which would probably require a social movement to move it forward, these antitrust arguments have the potential to gain traction without necessarily requiring legislation or a revolution against the current antitrust regime. The 1970s shift toward Chicago-style antitrust happened, to a considerable extent, because the old economic framework seemed increasingly inadequate for explaining the world people found themselves in. As the current framework comes to seem similarly dated, this could be another moment when such change is possible.

Written by epopp

August 10, 2017 at 1:33 pm

the democrats can’t decide how radical they want to be on antitrust

The other day I wrote about the current moment in the spotlight for antitrust. (Here’s the latest along these lines from Noah Smith.) Today I’ll say something about the new Democratic proposals on antitrust and how to think about them in terms of the larger policy space.

The Democrats are basically proposing three things. First, they want to limit large mergers. Second, they want active post-merger review. Third, they want a new agency to recommend investigations into anticompetitive behavior. None of these—as long as you don’t go too far with the first—is totally out of keeping with the current antitrust regime. And by that I mean however politically unlikely these proposals may be, they don’t challenge the expert and legal consensus about the purpose of antitrust.

But the language they use certainly does. The proposal’s subhead is “Cracking Down on Corporate Monopolies and the Abuse of Economic and Political Power”. The first paragraph says that concentration “hurts wages, undermines job growth, and threatens to squeeze out small businesses, suppliers, and new, innovative competitors.” The next one states that “concentrated market power leads to concentrated political power.” This is political language, and it goes strongly against the grain of actual antitrust policy.

Economic antitrust versus political antitrust

Antitrust has always had multiple, competing purposes. The original Progressive-Era antitrust movement was partly about the power of trusts like Standard Oil to keep prices high. But it was also about more diffuse forms of power—the power of demanding favorable treatment by banks, or the power to influence Congress. That’s why the cartoons of the day show the trusts as octopuses, or as about to throw Uncle Sam overboard.

The Sherman Act (1890) and the Clayton Act (1914), the two major pieces of antitrust legislation, are pretty vague on what antitrust is trying to accomplish. The former outlaws combinations and conspiracies in restraint of trade, and monopolizing or attempt to monopolize. The latter outlaws various behaviors if their effect is “substantially to lessen competition, or to tend to create a monopoly.” The courts have always played the major role in deciding what that means.

Throughout the last century, the courts have mostly tried to address the ability of firms to raise prices above competitive levels—the economic side of antitrust. For the last forty years, they have focused specifically on maximizing consumer welfare, often (though not always) defined as allocative efficiency. Since the late 1970s, this has been pretty locked in, both through court decisions, and through strong professional consensus that makes antitrust officials very unlikely to challenge it.

Before the 1970s, though, two things were different. For one thing, the focus was more on protecting competition, and less on consumer welfare per se (the latter was assumed to follow from the former, and was thought of a little more broadly). For another, the courts sometimes took concerns into account other than keeping prices low.

The most common such concern was the fate of small business. Concern for small business motivated the Robinson-Patman Act of 1936, which prohibited anticompetitive price discrimination. It was clear in the Celler-Kefauver Act of 1950, which restricted mergers out of fear that chain stores would eliminate local competition. And the courts acknowledged it in cases like Brown Shoe (1962), which prevented a merger that would have controlled 7% of the shoe market by pointing to Congress’s concern with preserving an “economic way of life” and protecting “local control of industry” and “small business.”

Today, Brown Shoe is seen as part of the bad old days of antitrust, when it was used to protect inefficient small businesses and to pursue confused social goals. This is a strong consensus position among antitrust experts across the political spectrum. While no one thinks that low prices for consumers are the only thing worth pursuing in life, they are the appropriate goal for antitrust because they make it coherent and administrable. Since those experts’ views dominate the antitrust agencies, and have been codified into law through court decisions, they are very resistant to change.

The Democrats’ proposal: radical language, incremental proposals

So when the Democrats start talking about “the abuse of economic and political power,” the effects of concentration on small business, and limiting mergers that “reduce wages, cut jobs, [or] lower product quality,” they are doing two things. First, they are hearkening back to the original antitrust movement, with its complex mix of concerns and its fear of unadulterated corporate power.

Second, they are very much talking about political antitrust, and political antitrust is deeply challenging to the status quo. But their actual proposals are considerably tamer than the fiery language at the beginning, and are structured in a way that doesn’t push very hard on the current consensus. New merger guidelines could make some difference around the margins. Post-merger review would definitely be good, since there’s currently no enforcement of pre-merger conditions that firms agree to, and no good way to figure out which merger approvals had negative effects. I have a hard time seeing a new review agency having much effect, though, since it’s just supposed to make recommendations to other agencies. Even I don’t like bureaucracy that much.

So my read on this is that the Democrats feel like they need a new issue, and it needs to look like it helps the little guy, and they want to sound like populist firebrands. But when you get down to the nitty gritty, they aren’t really so interested in challenging the status quo. That is, basically, they’re Democrats. Still, that the language is in there at all is remarkable, and reflects a changing set of political possibilities.

Next time I’ll look at some of the problems people are suggesting antitrust can solve. Because there are a lot of them, and they’re a diverse group. Tying them together under the umbrella of “antitrust” gives an eclectic political project some nominal coherence. But is it politically practicable? And could it actually work?

Final note: If you are interested in the grand historical sweep of antitrust in capitalism, I recommend Brett Christophers’ The Great Leveler. Among other things, he totally called the emerging wave of interest before it actually happened. Sometimes the very long lens is the right one to use.

Written by epopp

August 3, 2017 at 3:04 pm